Why replacing staff with AI backfires - and 5 ways

What happened

Defaulting to AI-enabled layoffs is often seen as a shortcut to cost-cutting. ai, which tracks AI-enabled layoffs, reported that 126,000 US employees lost their jobs between January 2025 and June 2026 due to AI-related factors. Ankur Anand, group CIO at recruiter Harvey Nash, told ZDNET it's easy to see why many executives regard AI deployment as a pathway to cost-cutting.

" Stephen Wood, chief operating officer at financial services firm Rathbones Asset Management, is another business leader who believes the impact of AI on the workplace will be positive rather than negative. He referred to the legal industry, where experts regularly assert that AI will disrupt employee roles and responsibilities. AI can do some of the work, but it has significant limits.

"The reality is that, yes, generative AI could do the job of a paralegal; it can go through untold amounts of cases, and, if you can get it not to hallucinate, it can write up everything you need to know," he told ZDNET. "However, how does anyone then become the lawyer who stands in the court during the case? " Wood said he sees similar trends in his own industry.

AI can be used to pick up some tasks, but not at the expense of human talent. "I'm not thinking in any way that this is a technology that removes people. It certainly stops me from needing to hire as many people as possible, and it certainly makes me be able to do more, and it makes my people able to do more," he said.

" Education is also a key part of the process for Tim Chilton, managing geospatial consultant at the UK mapping agency Ordnance Survey, who acts as his organization's internal AI champion. One of his exploratory use cases centers on deploying Snowflake agentic AI technologies.

Why it matters

"Early messages from vendors, consultants, and even some boards have focused on productivity, automation, and doing more with less," he said. " This default position paints a grim picture for professionals anxious about AI-enabled job cuts. However, replacing workers with AI is no guarantee of success.

In fact, a growing body of evidence suggests many businesses are beginning to recognize the limitations of AI and even regret some of their job-cut decisions. Research from Careerminds found that slashing jobs is unlikely to create the value senior executives crave. Three-quarters of organizations found AI layoffs cost more than they saved, and as many as nine in 10 companies would rethink them given the chance.

Such is the sense of regret that analyst Gartner estimates 50% of companies that attributed headcount reduction to AI will rehire staff to perform similar functions by 2027. In short, suggested Anand, firms that treat AI mainly as a cost‑cutting tool are missing the bigger opportunity -- allying technological capability with human excellence to generate new value for the business.

"If your AI strategy starts and ends with headcount, you are using a growth technology to run a shrinkage plan," he said. " Steve Lucas, CEO at integration technology specialist Boomi, told ZDNET that the starting point for value-based considerations should be a big dollop of circumspection about AI-enabled layoffs.

While emerging tech will change roles and responsibilities, many of the job cuts attributed to AI -- particularly in the IT industry -- are companies looking for a convenient excuse. "The reality is that AI will have a massive impact on jobs," he said. " Lucas said professionals should question so-called experts who suggest AI will mean the end of work as we know it.

After all, these are still early days for automation. "We don't understand the change, and we can't fully see past it, and anyone who says they do is selling something," he said, before suggesting that pioneering companies will find ways to embrace AI to the advantage of their human workforce. "I am an AI optimist for a long list of reasons," he said.

What to watch

Chilton told ZDNET that the initiative aims to give staff a chatbot-style interface that provides timely access to statistics, such as for a last-minute sales call, that might otherwise have taken days or weeks to surface. In short, the initiative's objective is to enable existing staff via innovation, rather than replace human talent with AI. "That's the approach we're trying to promote within our customer team," he said.

" Internal professionals at the Ordnance Survey are even encouraged to define the balance between technological and human agency. "They can say when enough is enough," he said. "And Snowflake has a limit for us. I don't want AI across everything.